SBP lends a helping hand to exporters

The State Bank of Pakistan (SBP) has announced a relief package to support exporters affected by loss of demand due to COVID-19 and to prevent export sector from any liquidity crisis.
Due to the COVID-19 pandemic Pakistan's exporters are facing declining demand in overseas markets and problems in executing existing orders. To support exporters in these circumstances and to prevent current liquidity problems from turning into solvency problems amongst exporters, SBP announced a number of relief measures on Friday to support the export oriented sector and avert liquidity crisis.
In view of the prevailing circumstances in the backdrop of challenges being faced by the export sector in post-COVID-19 scenario, SBP has provided relief to customers under Export Finance Schemes (EFS) and Long Term Financing Facility (LTFF) schemes and for realization of export proceeds. SBP has adopted a strategic objective to support exports for sustained improvement in Pakistan's balance of payments and growth due to emerging circumstances in wake global outbreak of COVID-19. SBP believes that these measures will facilitate exports and said that it stands ready to take additional measures as the situation related to COVID-19 and its impact on the economy evolves. SBP provides refinance to banks to provide cheap credit at interest rates that vary between 3 to 6 percent to exporters for working capital and new projects under EFS and LTFF schemes. The total subsidized credit to exporters outstanding under both these schemes is currently approximately Rs 660 billion. SBP has announced following measurers to facilitate the export sector.
Relaxation in matching amount under EFS:
Availing cheaper credit under EFS is linked with the export performance. Currently, exporters are required to export twice the amount of borrowed funds during FY 2019-20 on daily average product basis. In case of failure in meeting the requirement penalties are imposed and the credit limit for the next year is also reduced accordingly. As a relief measure SBP has reduced the performance requirement from twice (2) to one-and-a-half (1.5) times that will be effective for the current year as well as for FY21.
Extension in time period to meet performance requirements: SBP has also granted an additional period of 6 months to exporters for meeting required export performance against financing of EFS/IERS-II for monitoring period of FY 2019-20. Previously, exporters were required to show performance under the EFS schemes by end-June 2020. Now, this period has been extended by 6 months to end December 2020.
Accordingly, eligible entries showing shipments and export proceeds realization up to December 31, 2020 are allowed to be included in the export performance of FY 2019-2020. Since the additional period will also be counted towards setting new limits, this will help the exporters in availing higher limits for FY21.
Extension in time period to ship goods:
Exporters availing the subsidized credit schemes are required to ship their goods within 6 months of availing credit under EFS. In case of failure, penalties are imposed. This period has been extended from six to twelve months. Therefore, exporters will not be liable to pay penalties due to breach of this condition during January to June 2020. In case of non-shipment after January 01, 2020 till to-date, the fine already charged will be retained by SBP BSC offices, till submission of Application Form used for refund of non-shipment fine within extended period i.e. six months. However, in cases where delayed shipment fine has already been charged against shipment falling due from January 01, 2020, the same will be refunded. Relaxation in conditions for Long Term Financing Facility:
Exporters who want to avail credit under Long Term Financing Facility (LTFF) are required to have exports worth 50 percent, or $5 million, of the total sales to become eligible. This limit has been reduced to 40 percent or $4 million for all the borrowings under LTTF during the period January 01, 2020 to September 30, 2020.
Moreover, under the requirement of annual projected exports performance for four years to avail LTFF for new or BMR projects has been extended by another one year. Now the projected exports performance will be measured in 5 years.
Realization of exports proceeds:
Another major relaxation has been provided to the exporters on foreign exchange side to help exporters provide extended time to their buyers in making payment due to above pandemic.
Keeping in view the difficulties faced by the exporters, SBP has also allowed banks to enhance the time period for realization of exports proceeds from existing requirement of 180 days to 270 days on a case by case basis where the delay is related to COVID-19.
Authorized Dealers (ADs) may allow extension in realization of export proceeds to exporters up to 90 days beyond the expiry of six months from the date of shipment, provided the expiry of six months falls between January 1, 2020 to June 30, 2020. However, this extension will be provided by the ADs subject to submission of satisfactory explanation by the exporter along with supporting evidence showing delay in realization of export proceeds due to COVID-19 pandemic. Authorized Dealers would not be required to submit revised reporting of overdue cases for the month of January and February 2020.
Extension in time period for import of goods:
In order to facilitate importers, SBP has extended the time period for import of goods into Pakistan against advance payment from existing requirement of 120 days to 210 days.
In case of advance payment against imports, ADs are required to obtain an undertaking from the importers that in case the goods against advance payment are not imported and related shipping documents are not submitted to AD within four months from the date of advance payment, the AD will recover a penalty @1 percent per month or part thereof on the amount of advance payment from the date of remittance till date of submission of shipping documents. As an exception to the above instructions, ADs may extend the time period for import of goods and submission of shipping documents, against advance payment, up to 90 days from the due date of import of goods, under general or special permission, in cases where the due date falls between January 01, 2020 to June 30, 2020.
However, this extension will be provided by the ADs subject to submission of satisfactory explanation by the importer along with supporting evidence showing delay in import of goods due to COVID-19 pandemic.